Co-operation and creativity needed for pensions and job training

TheStar.com – Opinion/Commentary – Ontario’s idea to create its own pension plan raises the stakes in the conflict between the province and Ottawa.
Jan 23 2014. By: Thomas Klassen

The announcement that former prime minister Paul Martin will help Ontario design its own pension plan raises the stakes in the federal-provincial conflict over the future of Canada. This conflict is evident not only in pension policy but also job training programs for unemployed Canadians.

At the heart of the disagreement are different visions of the role of the state and the role of federalism.

The federal Conservatives and some provinces such as Alberta hold that citizens should be provided with options but not be forced by the state to behave in a particular way.

For example, the federal government created Pooled Registered Pension Plans as a way for workers to save more for retirement. Pooled plans allow small business owners and their employees to establish low-cost pension plans. But they are entirely optional. Tax-free savings accounts also established by Ottawa are another means for individuals to save more for retirement.

However, expecting most low- and middle-income Canadians to voluntarily set aside more money for retirement is not realistic. In fact, with interest rates expected to increase in 2014, saving money for use decades in the future will be even harder as mortgage, car loans and other payments rise. Canadian workers have nearly three-quarters of a trillion dollars of unused RRSP contribution room.

Few employers have created pooled plans for their workers because there is no requirement that they do so. Rather, employers are eliminating company pension plans or shifting from defined benefit plans to less costly defined contribution plans.

On job training, Ottawa has proposed the Canada Job Grant whereby government and employers will provide up to $15,000 per worker toward skills training to find a new or better job. However, under the proposed program less money will flow for services that help those with significant barriers to employment. The provinces fear that the federal plan, which is geared to those who are job-ready, will disadvantage those who need more assistance to become employable.

The second disagreement is about the relationship between Ottawa and the provinces.

If expanded, the Canada Pension Plan would better serve low- and middle-income Canadians in preparing for retirement, and avoid the need for a made-in-Ontario pension plan. However, the CPP cannot be amended without the consent of the majority of provinces.

Pooled pension plans will only be available to a small fraction of Canada’s workforce if provinces sign on. Most have not. Ontario only recently published a discussion paper on whether it should introduce such plans.

Getting pension policy right will involve the messy business of federal-provincial negotiation, trade-offs, late-night meetings, debate and compromise. It might also require listening to and involving workers as well as employers.

For job training, since 1995 the federal government has transferred most of its staff and funding — $2.5 billion per year — to the provinces. Ottawa now directly controls only 10 per cent of the employment training that occurs while the provinces and aboriginal groups handle the other 90 per cent.

Getting skills training and pension policy right requires ongoing collaboration between Ottawa and the provinces. It means putting into place ways to guide training programs that use the knowledge of businesses and training providers, and ensure that best practices are shared across Canada. It must also be recognized that some individuals require more assistance and support than others.

Leaving pension improvements and job training reforms dangling or each province going its own way is dangerous. Adjustments to strengthen pension and job training require a long time to come into effect. Implementation is slow and gradual, and the impact on the lives of workers and retirees, as well as employers, takes many years to be felt.

Waiting for a crisis to occur to spur politicians results in dramatic policy shifts. Reacting to crises does not result in sound policy, but rather creates resistance from citizens, as events in Greece, France and other countries have demonstrated.

Leaving individual Canadians to secure their own prosperity and security and believing that one level of government can go it alone is folly. Stronger pensions and better job training programs arise from co-operation and creativity, not dogma and turf wars.

Thomas Klassen is a professor of political science at York University.